Seadrill (SDRL), the indebted oil rig firm controlled by Norwegian billionaire John Fredriksen, has agreed a restructuring that almost wipes out existing shareholders after filing for Chapter 11 bankruptcy protection.
A deal with a consortium of investors, as well as bank lenders and many of its bondholders, will bring in more than $1 billion in fresh funding and aims to allow the firm to maintain its fleet of drilling units and pay creditors and staff.
However, its shareholders will see their stakes heavily diluted. “Holders of Seadrill common stock will receive approximately 2% of the post-restructured equity,” Seadrill said in a statement published late on Tuesday.
More than 97% of its secured bank lenders, including DNB, Danske Bank and Nordea, supported the deal, as did approximately 40% of bondholders and a consortium of investors led by Fredriksen’s Hemen Holding.
The banks agreed to defer maturities of secured credit facilities, totaling $5.7 billion, by approximately five years with no amortization payments until 2020, Seadrill said.
The filing in a Texas court is the latest step in a years-long process to restructure what was once the world’s largest offshore driller by market capitalization and the crown jewel in the business empire of shipping tycoon Fredriksen.
“With our improved capital structure, we will be in a strong position to capitalize when the market recovers,” said Anton Dibowitz, CEO and President of Seadrill Management.
The agreement provides $1.06 billion of new capital, comprising $860 million of secured notes and $200 million of equity, and addresses Seadrill’s liabilities, including funded debt and other obligations, it said.
The company also aims to convert $2.3 billion of unsecured bonds and other unsecured claims into approximately 15% of the post-restructured equity.
Seadrill shares have fallen more than 99% from their 2013 peak as it was hit hard by oil companies curtailing demand for rigs when crude prices crashed. They traded 7% lower at 1.65 Norwegian crowns at 8:05 a.m. GMT on Wednesday.
Seadrill said it had over $1 billion in cash at the time of the court filing in the Southern District of Texas.
The company has a secondary U.S. listing and the Texan city of Houston is one of its five regional bases.
Houlihan Lokey served as Seadrill’s financial advisor while Alvarez & Marsal served as its restructuring advisor.